The Bank of England has increased base rates to 0.5% from 0.25% after the Monetary Policy Committee (MPC) voted in favour of the rise.
Rates previously rose in December 2021 from 0.1% to 0.25%, marking the central bank’s first back-to-back increase since June 2004.
In addition, official data published in January, has shown that inflation had also risen to its highest level in more than a decade.
So, what does the 0.5% interest rise mean for you?
What happens to my current mortgage?
For the vast majority of mortgage holders, nothing will change, as 74% of all current mortgages are fixed.
Here are the key points mortgage holders should be aware of:
Fixed are Fixed
If your mortgage is a fixed rate, this new interest rise will not affect your current payments, your rates WILL NOT change during the fixed period. However, if your mortgage is due to expire soon, it is certainly worth checking if you can fix a new deal now. Be aware, with the changes, any new fix you remortgage to in the future, may now end up being more expensive than your current deal.
Standard Variable Rate or ‘Discount’ Mortgages MAY rise
You’ll usually only be on a Standard Variable Rate (SVR) after your fixed or tracker mortgage ends. The rate will rise dependant on your lender, so it would be wise to check this sooner rather than later, and also think about signing up to a new fixed rate mortgage. However, a ‘discount’ mortgage follows the SVR at a set rate, for example, if the SVR is 4% and the rate is SVR minus one percentage point, it’s 3%.
Tracker Mortgage Rates WILL Increase
As their name suggests, tracker mortgages track the base rate, so your mortgage costs will go up with the base rate increase. It could be time to see if you are able to switch to a better fixed rate deal.
Should I do anything?
If you are currently on a fixed rate mortgage, your rate will be locked in for a set amount of time and will not change. But, if that fixed mortgage is due to expire within the next three to six months, we’d urge you to speak to one of our in-house mortgage experts as soon as possible to see if you can remortgage onto a better deal, as you’ll be able to lock-in deals that are available now for the next few months.
If you’re on a SVR or ‘discount’ mortgage, your mortgage is likely to rise by 0.5 percentage points, however this will depend upon your lender. If you’re on a tracker this will definitely rise by the same amount as the base rate. As rates are expected to rise over the next two years in attempt to get inflation back to its 2% target, now is certainly the time to consider switching to a fixed rate mortgage.
If you are in a position to be able to switch or are wondering what your options may be and if you are even in a position to be able to look for a new deal, then do not hesitate to contact your local Arden office today. Our in-house financial advisors could find you a great two, five or even ten-year fixed rate deal, as they have access to whole of market lenders, securing you affordable mortgage payments through these uncertain times.
Even if your current deal is fixed for a further six months or more, they may be able to help you work out if it’s sensible to buy out of your current mortgage in order to secure a more affordable deal now, than the deals which may be available in one or two years’ time.
Our financial experts are here to help guide you through the entire mortgage process, offering a free, no obligation consultation to help you make an informed decision when it comes to arranging one of the biggest financial commitments you are ever likely to make.
Our personal service will also help you to get to grips with understanding the finer details of arranging your mortgage, as well as helping you to manage your budget. We’ll also provide you with support with your application from start to finish.
To book your free, no-obligation mortgage appointment today, simply contact your local Arden Estates office.